Innovation & Its Discontents: How Our Broken Patent System is Endangering Innovation & Progress, & What to Do About It

Innovation and Economic Growth, Intellectual Property and Patents

Article Snapshot

Author(s)

Adam B. Jaffe and Josh Lerner

Source

Princeton, NJ: Princeton University Press, 2004

Summary

Argues that the U.S. patent system is badly managed, has a negative effect on innovation, and proposes some reforms.

Policy Relevance

The ease with which patents are obtained, and the legal power of patents, has increased and is negatively affecting innovation in the United States.

Main Points

 
  • Patents grant firms exclusive economic rights, typically to use a manufacturing process or to produce certain goods; this is economically costly in the short run but may encourage innovation by rewarding productive inventors.
     
  • In the United States recent changes to the patent system have made patents more powerful than they have been historically.

    • In 1982, Congress consolidated federal patent appeals into a single court, the Court of Appeals for the Federal Circuit (CAFC); this court has proven to be friendlier to patent holders than earlier courts. For example, patent holders can now obtain “preliminary injunctions” to prevent rival firms from operating even before a patent is proven valid.
       
    • In the early 1990s, the U.S. agency responsible for issuing patents, U.S. Patent & Trademark Office (PTO) was partially privatized, and it has since faced incentives to approve more patents with less review.
       
    • Firms found to be infringing on patents in the U.S. today are likely to face significantly larger damages than in earlier periods.
       
  • As a consequence of the increased power of patents, firms spend more time seeking patents for both defensive and offensive purposes, and operating in areas where innovation is important has become legally risky (and so more costly) for firms.

    • The U.S. patent system, in this sense, is holding back innovation.
       
  • The authors suggest that these problems could be ameliorated with additional barriers for patent approval, permitting parties outside the PTO to contribute to the patent approval process, and greater use of experts (rather than juries) in some parts of patent lawsuits.

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